As expected, the final 2009 numbers showed a spike in bankruptcy filings. There were 1.43 million bankruptcy filings in 2009, a 32 percent increase from 2008. Consistently, every month in 2009 reported bankruptcies in excess of the same month in 2008. Last month, there were 22 percent more bankruptcies than in December 2008.
The recession has caused bankruptcies to reach a level that has not been approached since 2005, when Congress rewrote the Bankruptcy Code to discourage consumers from filing bankruptcy. This year's 1.43 million filings was the seventh-highest year on record, behind 1998 and 2001-2005.
Some experts contend that the 2005 Bankruptcy Code reform has been ineffective. They attribute the decline in bankruptcies after 2005 to the healthy economy, the surge of people filing bankruptcy in 2005 to avoid the new rules, and the new rules making bankruptcy more expensive and time-consuming. The reform had intended to prevent filers from abusing the system. But, those safeguards are now costing filers more money and delaying relief to families that need protection from creditors or need to save their homes.
This year does not project much, if any, reduction in bankruptcies. Foreclosures and subprime mortgages going bust will likely continue. And many more families may be under financial stress due to unemployment and underemployment in 2009.
